How to Create an Economic Crisis !

The following are a list of ways you could contribute to an economic crisis.

These were all valid ways to create an economic crisis in 2007

What is remarkable is that after all the tax payers money going into enquiries to discover the cause of the crisis, non of the contributors below have been removed four years on.

Politicians like David Cameron and Boris Johnson are in their current posts due to promises which they made which were to pressure the banks into changing their ways.

It is time for the British public to be more careful about who the future leaders are.

1.......The Decision of the governments not to Police the behaviour of individual employees within the finance Industry.

Recently, UBS, HSBC and Barclays have been fined many millions of dollars, all for completely different reasons. The problem is these fines will have little affect on the individuals who are responsible. In fact the individuals in many cases will have departed when these payments have to be made. You may just as well fine the customers of these banks simply for choosing the wrong business to look after their finances, because it is these people who will be paying the bill to the regulators involved. Interest rates on credit cards will rise and pension funds will suffer as a result of the losses to these banks, as well as many others to be fined over the LIBOR rate rigging.

Whilst the governments choose not to target the individuals in most cases for their crimes, there will be incentives for investment in illegal businesses by the finance industry, Ponzi schemes, and excessive risk taking with invested money. This is because there is little chance the individual will end up paying for the crime even in the event they are caught in the Act. 

2.......Misunderstand a heap of invested money as a signal for demand of 'Bankster Trash'.

Stock brokers in the stock markets use invested money to buy stuff like shares in businesses, commodities, business debt, mortgage debt and government debt.

Stock brokers only buy stuff if they think the value of something is going to rise. This can be influenced purely by the fact that the money being made available to stock brokers is rising. The modernisation of parts of the world, and people from those locations opening bank accounts and saving money means that the pool of money being made available in the stock markets grows. This can influence the prices of homes, businesses and commodities purely as a result of stock brokers touting up the prices. However the reason for this is total nonsense as it has no genuine link to the product being bought. The price rises as a result of money sitting innocently in a bank account. The owner of the money doesn't want what is being purchased with it. The stock broker doesn't want the product. He only wants the profit when the product is sold on.

In the lead up to the economic crisis this growing heap of cash in bank accounts and investments was a major issue.

3.......The selling of debt throughout the financial industry................

This is definitely one of the major contributors.

If when you lend money to some one, you had to wait till the person you lent it to paid you pack, it would make you careful who you lent money to. You would also take more of an interest in what the loan was for.
Because of the demand for investment material, as detailed above in no. 2, it has become easy for banks to sell debt to other financial institutions. Before the financial crisis, all kinds of debt was rising in price as demand for investments caused the price to rise. This made it easy for the big banks to replace lent out cash to be leant again, again and again. Each time passing the risk of the borrower defaulting on the repayment of the loan. The problem is, although the bank has passed on the risk. The risk is still in the system and some one else is going to suffer if the borrower defaults. However, financial institutions found ways of spreading this risk by bundling and mixing up lumps of debt and giving them investable product names like CDOs (Collateralised Debt Obligation). 

4.......Big business Buyouts.........

Big business buyouts are a major part of investment banking.

When a large company buys another company, it will borrow the majority of the money (80-90 %) from banks.

 However the costs of these buyouts are substantial.

Some of these costs can be recovered due to the extra market dominance the combined companies will have   over competitors. Other savings can be made such as combining administration from the two companies to one office. Reducing costs of executives and employees.

This can often work though even when it does, it may be temporary as the banks may finance a similar merging of two bigger competitor companies.

The important thing to understand here is that the banks think they can justify putting companies into major debt, when putting the two companies together would not actually require them to borrow a fortune from the banks. They could combine resources of the two companies without a bank needing to be involved.

 The reason it has become standard procedure is that;

a) Banks allow executives of these companies to furnish themselves with pay increases which can be funded by the debt, whilst the debt may be leant against one or other of  the combined companies. It's one of the reasons why executive pay has risen so dramatically as compared to ordinary employees. Though it may be the employees will pay for the extravagant pay of the executives when the company collapses under debt and jobs are lost! 

b)As mentioned in '2' above, there is a mountain of cash which must be invested in something. If the investment banks stopped this so called 'investment in business' prices of other types of investment would probably rise, or oddly enough, the housing market throughout the world could get a much needed boost as the surplus cash would have a use.

Due to mergers and buyouts, banks effectively put themselves on the 'pay rolls' of these companies. When we pay for products and services provided by the companies, we are also paying bankers bonuses. Bonuses which in many cases are not justified !

5.......Lending to Landlords in Preference to ordinary people who want to own their own home...........

The banks lending to landlords to increase their property portfolios in the lead up to the crisis was a major part of the housing boom. In the years that led up to the crisis, in the U.K., landlords though clearly in the minority were buying up a large proportion of the homes that were going on sale. As rent charged by land lords does not reflect the cost of buying the property, tenants are paying a much higher price for their homes. In many cases the cost is so high, there is no job available which pays well enough to pay the rent and other costs of living. Working people who are renting their homes are getting hit twice by the landlords. Once for the increase in costs of their own home. Then again for paying higher taxes for the people who have been effectively pushed out of their potential job as a result of rising rent. Therefore paying unemployment and housing benefits.

David Cameron promises growth. Save your breath Pal ! The landlords will eat it up as soon as it appears with increased rent charges because of governments sherking their responsibilities and not regulating this economy wrecking business !  

6.......Derivatives............

The justification for the existence of Derivatives is for the hedging of risk.

A simple type of derivative is a futures contract for a crop.

A farmer can with the help of a broker can sell a futures contract for a crop which will , all being well, be harvested in a few months time. The farmer will get a fixed price at harvest time, regardless of the success of the crop. Even if it is destroyed in a flood. The value of a derivative is derived from the value of the crop at harvest time.

The derivative removes all risk from the farmer, but the risk is held by who ever is holding the derivative at any time. If the value of the crop at harvest time is higher than that paid to the farmer, then the holder of the derivative will make a return. If the harvest is destroyed then a loss will be made.

Banks also use derivatives to protect themselves from interest rate changes in a similar way to the farmers protecting their income from bad weather......

A slightly more complex derivative is a Credit Default Swap. This is derivative which takes on the risk from a  lender of a borrower defaulting on a loan. The holder of the derivative will gain if borrower pays up the debt, but could lose substantially if the borrower defaults.

Derivatives become even more complex with CDOs- Collateralised Debt Obligations. These are combinations of Credit Default Swaps which are packaged up together. They will be debt from a range of sources such as home mortgage debt, business mortgage debt originating from buyouts and private equity firms. The idea is that these enable investors to reduce risk by not putting all eggs in one basket.

The problem with these CDOs is that although they do spread the risk, the risk does not disappear. However, it encouraged banks to lend more and more money in the build up to the crisis. The even bigger problem was that to lend to more people and businesses, they had to become less fussy about who it was lent to, because all the most credit worthy people and businesses already had their share of debt.

In the boom that preceded the financial crisis lots of money was lent for corporate and management buyouts involving many of the worlds biggest companies. The most concentrated areas for these businesses being the United States followed by the United Kingdom. (The two countries with the biggest financial industries) This involved the lending of around 80% mortgage by investment banks for a large company or private equity company to buy another company. The problem is many of these investments were successful on a short term basis because costs were slashed after the take over with redundancies, closing of research and development departments and selling of important assets such as the property the businesses operated from. All this worked wonders for the balance sheets of these companies. The problem is this was short term. Once you have peeled the skin off an orange, you can't create the same illusion again and again, even if a bank gives $5 billion to try. There is going to come a time when the end of the road is going to be reached with these buyouts......and  I think returns on pension funds is evidence that time is looming! The problem is, while Collateralised debt obligations exist, banks can get rid of risk. That risk ends up in pension funds and other types of investment including mortgage accounts. This is why I  have "Your investment could cause an Economic Crisis !" written on the back of my jaguar. They did in the last financial crisis, they are continuing to contribute to the current economic crisis and will continue to do so. Probably until people take more control of their investments !

Although most of the national press never seemed to realise it, whilst sub prime loans were blamed for beginning the crisis, many of the people in the U.S. worked for businesses that had been involved in buyouts, and thus lost their jobs as the debt ruined these businesses. The employees mortgage payments therefore defaulted. Also the mortgages themselves were investments in other peoples mortgages and mortgages held by private equity companies and big companies that had bought out other companies. Investments that the sub-prime loans were invested in were failing because lots of big companies in the States were failing due to irresponsible debt put on them by the banks. The 'buyout business has however been protected by the financial industry by claiming that Sub-prime loans were the cause of the financial crisis. If these buyouts had been blamed for the financial crisis it could have jeopardised the whole of the business finance world including the future of the stock markets. As it stands, it looks like the home buying market has been near to sacrificed in order to save the more lucrative business finance world and stock markets. 

7........Short Selling............

This involves the selling of shares you don't own !

You borrow the shares off the owner so you can sell them. The reason being, you are expecting the price to drop......... So you are selling the shares while they are high in price. All being well, after you have sold the shares, the price drops and then you buy the shares back. You then must give the shares back to the originator of the shares along with the profits minus your own cut of the profits.

The problem is, when lots of shares in a business are sold in a short time. It will inevitably cause a downward trend in the price of those shares. So you could short sell a load of shares in the same company, owned by different parties, knowing that you could manipulate the market downwards for those shares. Hence, if you are clever enough, its difficult to lose......Notice how completely irrelevant a business, its executives and possibly loyal workers could be in relation to share prices whilst some one is short selling their shares!
There have been new rules to restrict certain aspects of short selling enforced by S.E.C and the F.S.A., since the financial crisis, so there is no doubt it was one of many contributors, but short selling continues today.

8........Privatisation .........

Privatisation is taking a business owned by the state, and therefore already paid for by hard working tax paying people and then selling it to investors. Much the same as selling a house you have fully paid for to a landlord, who you will pay rent to for the rest of your life. (The difference is you won't receive a load of cash when a business is sold off as the government will get it although you helped pay for it). You will pay rent (sorry, I mean the costs of the business)  for the rest of time at the amount that the 'landlord' of the business wants you to pay!

The buyout world contributed to the financial crisis as lots of private equity debt became toxic whilst many American businesses were collapsing under debt originating from buyouts. Many of these businesses started off as state run industries. As soon as any state owned business is privatised it immediately goes into debt. This is because they are never bought for cash. Instead they are used for fodder for pension funds. Banks will lend the money on the condition the pension fund will pay the mortgage off, irrespective of how well the new company performs. Usually the debt does not cause too much problems when first privatised, but this is clearly because the government (at least in the case of the UK)  sells at a price which will allow the business to continue problem free at least until it is well clear of the hands of the government. Obviously any mishaps that would occur shortly after privatisation could back fire on the government. The problems often arise after  the second and then third buyouts of the same business. Each time it is refinanced and  the price and debt goes up each time. Not so much because of the success of the company, but because pension funds and banks need feeding with new business and their desire to get involved touts up the price of these businesses! Eventually, the effects of the debt that is put into these businesses will be felt by the customers, as the costs of the debt will be added to retail prices. Privatisation did contribute to the financial crisis but it has had a much more worrying contribution to the the much bigger world economic crisis.

This graph shows that although wholesale prices have been blamed for rising consumer prices, there is something else influencing the upward trend in electricity prices in the U.K.

Would this have happened if the industry had not been privatised?

9.........Out of date Education.....

10.......Press & Media  -The finance industry's ability to manipulate them to mislead the public......

11......The vested interest of governments not to interfere with the finance industry- This vested interest, we are all suffering for............

12...... Not changing the system even when you know it is wrong

13......Justifying the financial system purely on the jobs it creates within the financial industry without accounting for the hundreds of thousands of jobs in other industries which the financial industry has cost.

14......Politicians not being held to their promises which get them the votes to get elected in the first place.

15......Governments using the wrong measures to control the economy.

16......Rating debt, using Credit Rating Agencies who get paid commission on the debt they rate !
 The better the ratings they dish out, the more debt they will get to rate!......

17.....Regulators like the F.S.A. and S.E.C. being paid proportionally to the profits of the finance industry.

18....Sub-prime Loans....These got most of the blame, but I think you will have gathered by now that there was a good deal more going on that also contributed to the financial crisis and the continuing economic crisis four years on.

UK Care Home Debt Crisis; There are too many investment and finance people on the 'payrolls' of these businesses ! These people are conveniently out of the jurisdiction of the police.The result is that the businesses collapse as if they had been infected with a terminal disease....

Unfortunately certain kinds of vulnerable people can become the targets of a sickening type of capitalism which we see all too often in the U.K. The care home industry is one of the most affected by misguided investment which is having a parasitical affect on these businesses. The basic problems are simple. There are simply too many investment and finance type people on the 'payrolls' of these businesses. Many of them can not be trusted to have any involvement in a business, yet they find themselves  conveniently out side the jurisdiction of the police.These people can achieve a healthy return on investment money whilst the debt being loaded onto the businesses increases almost uncontrollably.

Around 430,000 elderly and disabled people live in long term residential care in the UK, but only one in ten are now in council or NHS run institutions.

Voluntary and for-profit companies account for 57% of the independent sector compared with only 5% in 1989.

Southern Cross was the largest care home business until it collapsed. Many smaller care home businesses collapsed before Southern Cross.

If you want to see how Private Equity Firms, Buyouts and Privatisation all with help from banks, combine to create problems with various types of services, then you won't find a much better example than what has happened to Southern Cross Health care. I think it is a good example why our financial businesses need to be policed. At the moment, certain of types people who may call them selves business people can manipulate money from a business whilst slowly destroying that business .............and there is no one to stop them.

The problem is, these so called business people provide so much 'business' for our finance industry, that they get left alone by most politicians...................These politicians have various ways of profiting from allowing this destructive manipulation of these businesses and so often have a vested interest, thus it becomes even more difficult for those who want to outlaw this business...............


..................Here is what really happened to Southern Cross Health care............

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August 2002

The management backed by West Private Equity and Healthcare Investments Ltd, acquired Southern Cross through an £80 million  management buyout..........................................


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The definition of a Management Buyout (MBO) in general terms is a buyout which involves the management buying the company from the current owners or parent company.
..........But, in reality, a management buyout could be the management buying the company from the current owners ,.....who could be the same people.


So why would the management of a company want to go through the procedure of effectively buying the company from themselves?

The reasons are likely to be a combination of the following:- 

1....... The owner of the company would like to sell the company, but doesn't want to lose control of it.
2........The company currently has minimal or no debts.
3........The owners want to benefit from the value of their company by way of debt borrowed against the company's value. (But have this benefit without selling the company).

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September 2004

A secondary buyout of the business by the management  together with Blackstone Capital Partners followed for£162 Million.
Blackstone then acquired care home owner NHP (Nursing Home Properties) for £564 Million, which saw a competition investigation by the office of fair trading.


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As you can see with this second management buyout, the same management who bought the company from themselves the first time have now bought it for a second time. This time with a new mortgage and much more money. Along with the help of one of Britain's biggest private equity companies, Blackstone.

Its easy to forget that whilst this financial madness is going on, there are employees of the business trying their damnedest to provide comfort to vulnerable old and disabled people. Few, if any would have any idea of what was going on , on the finance side of the business. 

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November 2005

Ashborne Group Care Homes, comprising  10,000 beds in 193 homes was acquired for £85 Million.



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Okay, you will have noticed that Blackstone were subject to a competition investigation by the office office of fair trading. Its really good to know that their are business regulators in the U.K. who you can depend on ! 

After the acquisition of Ashborne, Blackstone re-organised the company.............. They called their new strategy a,"Sale and lease-back strategy."     ?

It basically involved all the property owned by Southern Cross Health care being sold off.

NHP bought up the properties and rented them back to Southern Cross Health care. NHP became a property only business.

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NHP               Sold to 'Investors'


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At the point that the original properties of Southern Cross Health Care were sold by Blackstone to 'investors' (Don't know at the moment who these investors were), Southern Cross lost control of it's future costs. 

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July 2006    Southern Cross Health Care floated on London Stock Exchange.

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Southern Cross collapsed as a result of the rent it was having to pay on the properties it used to own !!!!!!!!!!!
As in many other cases, the collapse of many businesses which seem to be happening on a weekly basis, many are avoidable. 

Note on Management Buyouts (MBOs) & Private Equity Companies.
A lot  of the information here is obviously second hand. X-Economics is having to use information made available by the business executives of the 'victim companies' and also the finance businesses including banks and private equity companies. In many occasions, where a news paper passes on information on  a management buyout to the public, the businesses involved may not have told the whole truth. The term 'Management Buyout' is one that could be used to put investor's minds at ease. The term implies that the people who may have been running the business are now 'putting their money where their mouth is'. The willingness of the management to put their own money in creates an illusion that they have no doubts in their own confidence in running this business. Hence encouraging investment and building potential value should the company be floated on the stock market..............Of course, this could be all an illusion. The management are simply co-operating with a private equity company who  want to buy the company. But want to give the deal some synthetic stability, due to a minority of people who have detected problems that they believe have been caused by private equity companies. The illusion is to make investors believe that the management is making the big decisions. In this particular example, there is no doubt that the short term gains and asset stripping, notorious in the private equity business destroyed Southern Cross and there will be many more similar cases in the near future.

                                     





                                                  to be continued............

The 'OCCUPY' movement; Why so much dedication by protestors, but little progress ?

First of all I would like to make clear that 'Anti-Crisis Economics' or 'X-Economics' is neither activist or protest group.

However, the information currently made available through these blogs will shortly create enough understanding of the current financial system, the problems within it and the proposals of how financial businesses should be working. ......One of the problems of the Occupy Movement is that ..............

1...........The public do not quite know what they have been protesting about.
Much of this is down to the press,.....for a number of reasons.

         A)A lot of the press do not understand what the problems with the financial system are.
             They have qualifications relating to journalism but may be finance is not their thing....

         B)Many national news papers have a political view which protects capitalism as their standard procedure regardless of the problems that unregulated capitalism has on everyone throughout the world.
This can also be said for TV companies.

Most of the news paper articles I have seen on capitalism protests seem to come up with this same phrase; 'Its about corporate greed.' This phrase is repeated again and again on different occasions which in my mind makes it look like the real reasons given by protesters are not reaching the news papers or TV screens. This one has probably been substituted for more detailed explanations which the news paper owner may prefer to keep from the public for reasons which may affect a corporation that owns a news paper (or TV company), or may be has been influenced by a wealthy individual from a large business or a political figure.

2............The protesters in many cases will not know the extent of the problems in the financial world or specifically what they are. However, there are plenty of good reasons for them not to know these details....

- You will not find what the banks do today in any degree course or at any other level. You will get a kind of image of banking that would fit into some kind of make believe world where the selfless financiers are bettering the world through their investment of our money.    I believe this to be for the simple reason that the banks do not want the world to know what they really do. The governments that are in control of education have their own reasons for what seems to be an eduction system that protects capitalism. The problem is that the kind of capitalism that is being protected is a destructive kind.

-Even qualifications in Economics are completely useless. I was going to study economics myself after leaving the finance industry only to find that economics barely recognises the existence of the stock markets and doesn't recognise the problems that banks and various types of investment can cause within the economy. Having worked within the stock markets I knew that the stock markets and the banks were a very influential force in economics ! After a lot of thought I decided a degree in Economics would be a complete waste of time as it would give a false image of what the real influences of economics really were.

-There are obviously plenty of books on banking and qualifications that go with them. The image of banking given in the books and portrayed by the education authorities is misleading. Ive read enough pages of these books to discover that they have gaping holes where question need answering, but these questions strangely go straight over the heads of the so called experts, who have no doubt got their degrees. The problem is , the degrees they have got will be as biased as the stuff they are writing!

 What I do on these blogs is give information about stock markets, banking and the influence on businesses and economics.............But all these books and banking courses are supposed to be on exactly the same subjects........I don't want to tell you whose wrong and who's right. Take a look at some banking books. Then take a good look at these blog posts.......Then make up your own mind..................

COMET IN ADMINISTRATION; INVESTORS TO BLAME?

Comet, the electrical retail store went into administration today.

There are a number of factors which contributed to this......

Many we hear about every day, in relation to other businesses which have suffered similarly.

The problem is the press and media are reporting a one sided explanation of the circumstances. The point of view which has been portrayed by the executives and may be financiers involved with these companies. This may be of a view that those involved may want to portray....................

In February 2012,  Comet was bought by private equity company, Hailey Holdings & Hailey Acquisitions in tandem with advisory private equity company OpCapita LLP for a token £2 ($3.23).

(You should note that;
Hailey Acquisitions was formed as recently as 2nd November 2011 and registered at Companies House in the U.K. ! There are no other companies under it's control other than Comet. The name may be a coincidence or may be not.)

The buyers received a £63 Million dowry payment from the seller. A dowry is basically a gift. Some may call it a bribe. This kind of thing should not need to go on. If this kind of thing went on in the stock markets it would be illegal. This is because it would be perceived as manipulation of the markets. If you don't think a  share is worth buying on it's face value, then you should not be encouraged to buy that share because the seller has slipped a few notes into your back pocket. In this particular episode, the amount going into the back pocket is a cool £63 Million ....Instead of a share in a company, it's a whole company... .............. It wouldn't be quite so bad if the money belonged to the seller, but it will be investors money that will be used for this gift incentive.  ....................... Those investors will obviously suffer as a result of this payment. The executives of Kesa Electricals, the business that owned Comet will however not be affected by the loss. In fact they will be charging their investors for their services, regardless of how badly their performance may be.

OpCapita is run by ex banker Henry Jackson. OpCapita has taken over just four businesses since it was formed including Comet. Of the four, two have gone into administration. The other company to go into administration was one of Britain's higher profile companies, MFI.

Although Hailey Holdings and OpCapita received the £63 Million dowry payment, they will not need to invest all of this in Comet as their investors are other investment companies. Their main investment is led by  Grey Bull Capital, an investment company based in London. Also investing were Elliot Advisers from the United States.....................................................

For the benefit of outsiders to this business, some of the things to note are as follows:-

Hailey Acquisitions was formed in November 2011. Just three months later, it was taking over one of the U.K.'s biggest retailers! ...................................If you have started, and currently run your  own business, this will be difficult to comprehend. ................................There is no sign of building up a reputation and a customer base............So how is it then that a business that has been formed so recently take over a high Street retailer of such importance to the U.K?  ....... ...................................  ..............................................................................to be continued....................

Mitt Romney ; This is the Wrong Man for President

I'm amazed by the support that this man has received, including one claim from Piers Morgan in a recent news paper article that "Mitt Romney may be the United States' cleanest politician ever. "With the information that has been available on this politician, I find it amazing the previous editor of the U.K.s Daily Mirror could come out with such a rediculous statement. My opinion of the British press was not very high to begin with, but has plummetted when a generally respected person can come out with a statement as ridulous as this. I have to say that I am highly suspicious that this has something to do with Piers Morgan's celebrity status in the States.

ALTERNET.COM, an American web site recently gave some more accurate details about Mitt Romney.

"Far from the respectable business man he claims to be, Romney has long engaged in horrific practices that mock American values."

"Republicans like to paint Romney as an entrepeneur whose activities at Bain Capital have benefited Americans."

"Romney has spent his career offshoring and outsourcing American production processes and associated jobs to countries like China where human labour is valued in the market at a very low wage rate."

"The sub-human conditions at these production facilities represent things that Americans are strongly opposed to. Child abuse, squalor, forced over time and peanuts for pay."

"A report recently released by the 'Institute for Global Labour and Human Rights' reveals that while Romney was deeply invested at a firm called 'Global Tech', low pay and horrific conditions were status quo at it's Chinese appliance factory. At this factory a fence topped with barbed wire encloses the workers and prevents outsiders from entering."

"From April through to August 2000, Romney and his 'Brookside Capital Partners Fund',an affiliate of Bain Capital, the company Romney formed- poured around $23 Million into the Global-Tech sweat shop in Dongguan, China. Among the defects outlined in the report were the following :-

"* Factory workers made 24 cents an hour in 1998 and less than 2$ a day. Wages in Global-Tech were less than 2% of average U.S. wages."

"* Whilst being CEO, Romney appears to have been un-interested in calling for improvements at the facility. Today the sweat shop is still a horror where starvation wages prevail and workers wrights are non-existent. Over crowded filthy dormitories, rotten food,routine 15-16 hour shifts. 105 to 112 hour weeks are the  norm."

"* The appliance factory has 800 student interns, 16 year olds forced to work repetetive exhausting 15-16 hour shifts on assembly lines with no over time pay."

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"On February 16 2012, Mitt Romney brought hypocrisy to new heights, assuring the public that, "We will not let China steal jobs from the United States of America.""

Like I tried to say in August, this is definitely the wrong man !
 

MANGANESE BRONZE, Black Cab Manufacturer in Administration

Manganeze Bronze is the company that owns the company that manufactures the City of London's Black Cab. It is manufactured in Coventry. Identical cabs are also manufactured in Shanghai by Geely, one of China's biggest vehicle manufacturers.  Geely supplies the world with the black cabs whilst Manganeze bronze supplies the U.K. only. This was as a result of an agreement by Geely and Manganeze Bronze in 2007. Geely owns 20% of Manganeze Bronze as a result of an agreement which gave them rights to produce the legendary black cab.

After the sale of part of the company to Geely, Manganeze Bronze sold the production plant in Coventry to a property company. Manganeze Bronze has been renting the building back since. This would raise question marks in many people's eyes as to whether Manganeze Bronze was seriously continuing long term interests of production of the cabs in the U.K.

Although selling off the plant may have short term benefits to Manganeze Bronze, such as cash flow the long term problems and added costs should have been predicted. The new owners of the plant are leasing the plant, obviously at a cost which the property under ownership by Manganeze Bronze would have been far lower.

Manganeze Bronze had been attempting to make a finance deal with Geely which would allow the Coventry plant to continue manufacturing.

The company has just announced that it is going into administration, after a failure to negotiate a deal that was acceptable to Manganeze bronze.

..............................................................................


What is most significant about this is how predictable it all seems to be.........


From the day Geely began manufacturing the cabs, they became competition to Manganeze Bronze. In fact, unfair competition in that Geely had far more freedom with the world as a market bar the U.K. whilst Manganeze Bronze left them selves with only the British Market to sell to. This was obviously part of the agreement when Geely bought 20% of the company.

The final straw for Manganeze Bronze happened when Geely could not offer a deal acceptable to Manganeze Bronze to refinance the company......The problem is Geely could have a new market for their cabs if the plant in Coventry was to close....London and the U.K. The place where the cabs began........Geely therefore have an incentive not to hand over the finance.

As for other investors....................Well who is likely to want to invest in this after the hole that Manganeze Bronze has dug the business into, by giving away too much of the market to Geely ?

The apparent short sightedness of Manganeze Bronze executives raises question marks as to what the long term plans for this business really were.......................

......................Unfortunately, this all looks like it may have been a master plan to move production of these cabs from Britain to China. May be I am wrong. But this type of thing has gone on all round the world in many different industries. It's resulted in many different industries moving from countries like the U.S. and the U.K., oversees...................Many of them had been bought in order to close them down ! Much of the finance comes from banks who probably don't always know what is being planned. But without any doubt, many of the banks often know exactly what is happening.

British Gas / N Power to Raise Consumer Price by 9%

 The British privatised power industry is again beginning to increase prices for the U.K. consumers. Both British Gas and N Power are raising their prices in the region of 9% in the coming weeks.

The graph below shows the difference in price for U.K. consumers (Customers of the biggest 6 electricity providers) and the wholesale price over the past five years.

The graph shows that where the wholesale price dropped two-thirds through 2011, the big electric providers pretty much maintained their prices.

This price level has been maintained through 2012 even though the whole sale price has at times during this period has decreased significantly, which will have increased income for these companies.

So here are the influential factors...............

THE REGULATORS

The problem with these private companies is that there is little to prevent these companies raising their prices to improve profits. We have all seen what is a failure by so called regulators, who seem to have plenty of talk and waffle about what should be happening, but in reality, rarely have any affect.
Strangely, the F.S.A., the U.K. banking regulator seems to suffer what seems to be identical problems to Ofgem, the U.K. power regulator. The idea is that billions of pounds of our taxes go to these regulators for them to prevent us from being ripped off by the businesses in these respective industries. However the slowness of their reactions, often total lack of reaction to some situations, and also their often what seems to be un-justified defence of their industries or businesses with in them, will draw conclusions to many cynical people that the regulators, are merely to create a buffer between complaining cusomers and those industries. Therefore allowing these private companies to keep their priority of making money, and not being inconvenienced by pesky customers.

THE GOVERNMENT

 There are added costs which are as a result of penalties against new green policies which are also adding to the costs of these businesses. The problem is that, if companies are being given penalties whilst they do not comply to new higher standards, this is actually a hinderence to the companies becoming greener ! The potential investment is going to the government. This could have the affect of the companies not investing enough in green energy and could risk the company's existence in the future.
Either the government has not given this enough thought, or the scheme is purely a way for the government to get more money out of these companies due to many avoiding paying taxes, and has little to do with green energy.

PRIVATISATION

Before all these companies existed, both electricity and gas were provided by national owned companies. If it was like this today, there would not be a number of companies apparently competing in the same market to buy gas in bulk, power stations, fuel for the power stations etc. Basically, this means privatisation pushes up the price as the sellers of these commodities knows that if one business is not willing to pay a certain price, another company probably will. Privatisation has therefore not really improved competition on the retail side, which is one of the apparent advantages according to people like David Camerron, it has simply increased competition on the wholesale side. Instead of Russia only being able to sell to one national business in any particular country, which would create more stability in this market, the Russians know there are many different buyers within each country where privatisation is rife, such as in the U.K. Therefore claims by various politicians that privatisation is a more efficient way of supplying our power are completely without foundation.

BORROWING

Companies in a good position to lever money out of their customers, for example in the power industry tend to get into major debt. This is because the banks know that we all need heat and electricty, and therefore know that the companies are likely to be able to increase their prices to recover money to pay off loans and other costs associated with the debt such as interest payments. Therefore the businesesses can easily get money from banks to buy other assets including other companies, or simply get a mortgage simply to pay off existing debt ! However, the banks enthusiasm to lend to these businesses can bring major difficulties to these companies. However, a temporary solution could be to encourage competing companies to also get into debt. This strangely enough would create temporary stability as competing companies would be in the same situation. This would be quite easy if you were to tell the executives of these companies that the debt could fund a nice pay rise as well as some new assets such as company cars ! However, this would be to the customers cost as they will be paying the usual costs of running the business as well as some un-necessary costs associated with debt. This is likely to result in many customers not being able to fuel their homes. If people are going to die as a result of the needs to feed bankers bonuses and the life style of the executives of these companies, those people can expect that the majority of the voting public are going to want to see a change in the way our vital sevices are provided. .......................Many of these companies are in debt and they have been run badly, on the finance side of the business at least, due to banking and various types of inefficient investment. That is investment that creates un-sustainable demands on a business. There is a possibility that some of these 'business people' who I really have to correctly refer to as landlords of the services mentioned (No offence to landlords intended, but they are their to syphon profits from these businesses whilst doing little to earn it, just like landlords), could find themselves being upstaged by operators who could run these services, with much lower costs. Due to a much more responsible attitude to finance. Electricity companies, gas companies, water companies, health companies could be run at much lower costs if it wasn't for demands associated with interest and returns on investment generation, along with leverage from banks. In short, they would have to be run in the way a nationally run  business would be run.

....Before you say that privately opereated businesses perform better than national run businesses, well you may have an argument if I didn't know better. It's true that many National businesses may appear to  have struggled as compared to private businesses when you judge them buy surplus cash or profits There are a number of reasons for this..........

The first is that ,the companies didn't need to make a profit.
 Prices charged to customers were based on the costs of providing the service. To charge much more than the actual cost would have been greed. Yet politicians defending privatisation will use this as there ace whenever privatisation of industries comes under scrutiny. They will always bring up the profits the new privatised businesses acheive in comparison to the lack of profit or surplus cash from pre-privatisation.........The businesses were not trying to make a profit.........Hence prices did not keep rising..............They employed more people, and those people were not treated like slaves, doing the work of would be redundant staff.

Second...... Loyalty or responsibiliy to the customer.
National  companies have employed more people than their private counterparts. Afterall the services that are being provided are for the people and you would not want any of those people to be left without heating, water, electricity etc. As a national company, if some body was being left without any of these services , then as a provider, you would not be doing your job. So the priority of these industries was to provide a service to the people. And that is all the people.
 Today things are different. These private businesses are now controlled by people who directly or in-directly have investments in them. Whatever form is financing these business, they are all affectively in debt to any one who has shares in them or to the private equity company that may own it, along with the banks who hand the debt to private equity companies to buy them. (This is un-related to any extra debt which the company may have which  may be used to buy assets, or use for running costs.)
Debt to investers, share holders, private equity managers, banks (Private equity companies constantly borrow money and then re-finance before the previous debt is paid off. Therefore if a company is owned by private equity, it will constantly be in debt ! This makes the banks a kind of share holder in a lot of these utility companies.)

The responsibility to investors, share holders, private equity companies, pension funds and banks means that supplying a service to all the people is no longer a priority. The customer is secondary to all of these investors.

To acheive returns on investments and to pay off debt to banks, these companies are run at a minimum cost as far as staff are concerned. National companies would have more staff. But the companies were nationally owned, and a few extra staff would have been no major problem. The people paying for them know that they, or family members need jobs.

So may be private investment can make a business reduce the costs to the public. But, this has nothing to do with private investment or the way executives run these companies when privatised. The same kind of measures could have been adopted if there was a need to do so by the government, whilst they were in control.

If national run companies were expensive to run,  then much of this wasted money would be down to the government departments not giving them enough attention. Also some near retirement people were probably employed along with disabled people. The privatised businesses are less likely to employ these people, as they will be looking to acheive something closer to 100 % efficiency from their wages budget. (This is not to say that people with disabilities are less able to do the job, but they are less likely to take on a person if there was any doubt)  In fact being of age or having a disability are not the only characteristics which may cost you your job if a business is intent on cutting costs. Just being British could become a disadvantage as many investment incentivised companies actively seek foreign workers. The foreign workers accept lower wages due to the extra value their wages have when sent back to their home country. This is a situation that many british potential workers living in a country where homes are targeted by investors putting an un-realistic pressure on prices, and costs of living have difficulty competing with.

GOVERNMENTS DISTANCED FROM THEIR RESPONSIBILITIES BY P0RIVATISATION..........................



THE FINANCIAL WORLD INFLUENCING THE WRONG KIND OF GOVERNMENT
CANDIDATES...................................



THE MEDIA & PRESS MIS-LEADING THE PUBLIC ON THE PROS & CONS OF PRIVATISATION AND INVESTMENT IN BUSINESSES......................................